Batanai SG (Private) Limited and Thallogen Investments (Private) Limited v Hortative Investments (Private) Limited

### Preamble
1
HH 252-2012
HC 7109/11
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BATANAI SG (PRIVATE) LIMITED

and

THALLOGEN INVESTMENTS (PRIVATE)

LIMITED

versus

HORTATIVE INVESTMENTS (PRIVATE)

LIMITED

HIGH COURT OF ZIMBABWE

KUDYA J

HARARE, 12 June 2012

Opposed Application

S Mahuni, for the applicants

Ms OT Sanyika, for the respondent

KUDYA J:  This is an application for rescission of judgment that was entered against the applicants and in favour of the respondent on 19 May 2011 in HC 8604/10.

In HC 8604/10, the respondent as plaintiff issued summons out of this court against the respondents as defendants on 25 November 2010 for the recovery of ZAR 55 850-00 together with interest at 25% per month calculated from 6 May 2009 to the date of payment in full and declaration of subdivision B of Lot 358 Highlands Estate of Welmoed measuring 5051 square metres held under deed of transfer number 433/2003 especially executable, costs of suit on a legal practitioner and client scale and collection commission in terms of the Law Society tariff.

The money was loaned to the first applicant for the purchase of trading stock from the respondent and the second applicant registered a mortgage bond in favour of the respondent of ZAR 1 million over the subdivision B of Lot 358.

On 2 December 2010, the Deputy Sheriff served the summons at the second applicant’s address of service stand 4202 Glen View, Harare on Talent Mtandadzi, the branch manager of Afro-Foods who accepted service for Thallogen. On 9 December 2010, the Deputy Sheriff also served the summons at 16 Terry Drive, Greendale, Harare by depositing it in a letter box after an unsuccessful diligent search at that address of service. It is noteworthy that in terms of the financing agreement executed between the respondent and the first applicant Batanai SG the address of service was provided as 61 Main Street, Gweru and 16 Terry Drive, Greendale, Harare or any other address specified to the other party in writing.

On 11 January 2011, the respondent applied for default judgment in chambers on the basis that the defendants failed to enter appearance to defend.  On 15 February 2011, KARWI J questioned firstly the basis for claiming interest at 25% when the agreement provided for a range of not less than 10% and not more than 25% per month and secondly whether the claim for collection commission and costs on the higher scale was in terms of the agreement. On 8 April 2011 the respondent reduced the rate of interest to 10% per month and averred that collection commission and higher costs were in terms of clause (b) of the mortgage bond. On 19 May 2011 KARWI J granted judgment against the applicants jointly and severally the one paying the other to be absolved in the sum of ZAR 55 850-00 together with interest at the rate of 10 per cent per month calculated from 6 May 2009 to the date of payment in full. The mortgaged property was declared especially executable and the applicants were ordered to pay costs on the higher scale together with collection commission as calculated in terms of the Law Society tariff.

The application for rescission was filed on 22 July 2011. David Kombora, the managing director of both applicants deposed to the founding affidavit. He averred that the default judgment in the main matter was served on Louis Kombora, a director of the applicants on 15 July 2011. The applicants filed the application in terms of Order 9 rule 63 a week later. He averred that the applicants were never served with the summons and were thus not aware of the proceedings. The second ground to establish a good and sufficient cause rests on an arguable defence on the merits. He averred that the financing agreement was illegal as the respondent was not licenced to advance loans and charge interest. He further alleged that the  capital amount of ZAR 55 850-00 had since been repaid leaving in dispute the question of whether or not the interest charged is usurious and offends the in duplum rule.

The respondent opposed the application; firstly on the ground that the applicants were in wilful default. Its deponent averred that Lewis Kombora was aware of judgment on 23 June 2011 when he came to negotiate payment terms that would forestall execution. He visited the respondent’s legal practitioners again on 8 and 13 July 2011. He did not pay a visit on 15 July as alleged. The visit of 13 July 2011 is confirmed by a proposal of that date by Thallogen to settle the judgment debt that was rejected by the respondent.

The respondent disputed that the capital amount of ZAR55 850-00 was paid and that it charged an unlawful rate of interest.

Order 9 rule 63 states:

63. Court may set aside judgment given in default

(1) 	A party against whom judgment has been given in default, whether under these rules or under any other law, may make a court application, not later than one month after he has had knowledge of the judgment, for the judgment to be set aside.

(2) 	If the court is satisfied on an application in terms of subrule (1) that there is good and sufficient cause to do so, the court may set aside the judgment concerned and give leave to the defendant to defend or to the plaintiff to prosecute his action, on such terms as to costs and otherwise as the court considers just.

(3)	Unless an applicant for the setting aside of a judgment in terms of this rule proves to the contrary, he shall be presumed to have had knowledge of the judgment within two days after the date thereof.

In Beitbridge Rural District Council v Russell Construction Co (Pvt) Ltd 1998 (2) ZLR 190 (SC) at 192 D-E SANDURA JA stated that:

“Rule 63(2) of the High Court Rules 1971 provides that the court may set aside a default judgment if it is satisfied that there is good and sufficient cause for doing so. In determining whether or not there is good and sufficient cause for granting such relief, the court normally considers: (a) the applicant's explanation of his default; (b) the bona fides of the application to rescind the judgment; and (c) the bona fides of the applicant's defence on the merits as well as its prospects of success: du Preez v Hughes NO 1957 R & N 706 (SR); GD Haulage (Pvt) Ltd v Mumurgwi Bus Service (Pvt) Ltd 1980 (1) SA 729 (ZRA).”

I proceed to apply the three factors noted above to the present matter.

It is trite that an applicant’s case stands or falls in line with its founding affidavit. In Mangwiza v Ziumbe NO & Anor 2000 (2) ZLR 489 (SC) at 492D-F SANDURA JA stated that:

“It is well established that in application proceedings the cause of action should be fully set out in the founding affidavit, and that new matters should not be raised in an answering affidavit. That principle was laid down many years ago in cases such as Coffee, Tea and Chocolate Co Ltd v Cape Trading Company 1930 CPD 81. At p 82, GARDINER JP said:

‘A very bad practice and one by no means uncommon is that of keeping evidence on affidavit until the replying stage, instead of putting it in support of the affidavit filed upon the notice of motion. The result of this practice is either that a fourth set of affidavits has to be allowed or that the respondent has not an opportunity of replying. Now these affidavits of Barnes, Turnbull, Lee, Gardner and Lang should in my opinion properly have been put in in support of the notice of motion. They are not a reply to what has been said by the respondent, and I am not prepared to allow them to be put in at this stage.’"

The explanations were known to the applicants before they filed the present application. They should have formed part of the founding affidavit. I agree with the respondent that the applicants have failed to proffer an explanation for their failure to file appearance. That they had moved is not an acceptable explanation as they did so without notifying the respondent of their new addresses. In any event, had the second applicant moved from Glen View, it is inconceivable that Mtandadzi would have accepted service on its behalf. The deponent to the applicants’ founding affidavit did not explain the fate of the summons served in the letter box or on Talent Mtandadzi. It was necessary for him to do so in his affidavit or through Talent Mtandadzi’s affidavit. His affidavit fails to provide an explanation for the default. The attempt to explain the default in the answering affidavit fails for the reason that this information was always known to it. In any event once the address of service changed, the first applicant had a legal obligation to notify the respondent of its new address. An affidavit from the new occupant of the Greendale address and Talent was required to establish whether applicants were not in wilful default. That both companies had moved from their respective addresses of service without leaving a forwarding address was not a good enough reason to avoid the consequences emanating from service at these addresses. In any vent the applicants do not take the court into their confidence on the dates they allegedly left the addresses of service.

I find that both applicants were in wilful default.

The second factor that relates to the genuineness of the present application is tied together with the defence on the merits and prospects of success. The finance agreement was designed to advance funds to the first respondent for promoting and furthering its goods procurement process. This is apparent from the statement of indebtedness attached to the applicant’s founding affidavit that showed that it returned a consignment of sugar to the respondent valued at US$ 134 408-80 that left the outstanding balance claimed in the summons of US$55 850-00. The applicants have not shown that the respondent was a moneylender. Rather it appears that it was involved in a commercial transaction exempted from the purview of the Moneylending and Rates of Interest Act [Cap 14:14] by s 20(3) of the same Act. It further appears to me that the transaction falls under s 4 of the Prescribed Rate of Interest Act [Cap 8:10] that is governed by agreement between the parties.

It is clear that the applicants agreed to the commercial transaction with a high interest rate. They cannot now complain that it is oppressive to their bottom line.

Clearly, they do not have prospects of success. They have displayed dishonesty by misleading the court that they have cleared the capital owing, when they have not. Their application for rescission is not genuine. It is designed to perpetuate non-payment of the outstanding indebtedness.

I agree that they should be mulcted with costs on the higher scale.

Accordingly, the application for rescission is dismissed with costs on the scale of legal practitioner and client.

Nyamushaya, Kasuso & Rubaya, first and second applicants’ legal practitioners

Matipano & Associates, respondent’s legal practitioners